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Nokia’s Johannes Giloth about bringing demand planning to board level

Nokia’s 150-year history is one of reinvention; recently it has been changing and innovating almost as fast as the telecommunications industry itself. In 2013 Nokia took full ownership of Nokia Siemens Networks, buying the other half of the venture from Siemens, and 2014 sold its handset business to Microsoft. Today Nokia Networks, one of the corporation’s two businesses, serves more than 600 customers globally. These include the world’s largest mobile operators, such as China Mobile, Vodafone and Airtel, who in turn have almost five billion subscriptions. Nokia is currently preparing for another major change, its purchase of Alcatel-Lucent, which is expected to close in Q1 2016.

By Helen Armstrong

At the same time, the entire telecommunications industry continues to evolve at tremendous pace. Nokia predicts that in 2025 the number of connected devices in the world will have risen from less that 10 billion today to around 50 billion. These will include machines such as cars and household appliances that will communicate with each other. “Today most data is generated by human beings; in the future much more data will be generated by intelligent machines that will talk to each other. The volume of data is exploding, likewise the demand for real-time communication which will require different hardware and software solutions. This will have a massive impact on the supply chain,” says Johannes Giloth, senior vice president operations, Nokia Networks. He describes the challenges of operating in this extremely dynamic and competitive marketplace.

What is your responsibility?

“As senior vice president operations, I am the business owner of all operations from demand planning to execution, procurement to manufacturing. It’s a one-stop shop.”

What is the strategy of the company: Operational excellence; Product Leadership or Customer Intimacy?

“Our supply chain strategy is built on operational excellence. It is fundamental; without this you cannot achieve your other goals. With an ultra-lean supply chain in place we have moved to the next step, which is to build in flexibility and agility to meet customer requirements and hence build customer intimacy. To do this well we need to understand the customer’s constantly changing needs within the perspective of the rapidly evolving industry.”

What are the main business challenges that drive supply chain projects at the moment?

“They are three-fold: Firstly our market is highly, highly competitive. We have to be lean. Secondly, in 2016 we expect to close the Alcatel-Lucent transaction. We are currently planning the processes, teams, organisation, culture etc., and we need to ensure from day 1 that we have a seamless transition. This is running parallel with our current day-to-day business, so we have our hands full. The third challenge, and equally large, is that the industry is changing big time. Automation and digitalisation are two of the biggest trends. We have digitalisation of information over the whole world with new players, such as Apple and Facebook, entering the customer environment. 3D printing is changing manufacturing so that in a couple of years from now you may not necessarily need centralised manufacturing. You can do it on site. New ways of distribution are emerging. Take for example Amazon and Intel who are investing in drones. This too will have an impact on us when it comes to visiting sites in remote places. All of these things are significantly changing the supply chain requirements.”

What do you do about these challenges?

“We have planned well in advance, and we have experience. To cope with the highly competitive industry, four to five years ago we established our ultra lean set up. We have undergone thousands of continuous improvement measures, including Kaizen thinking, throughout the factories and in the supply chain. We have taken out costs big time by implementing an end-to end KPI dashboard and we remain very cost sensitive. We are successfully managing to reduce costs and we stretch our targets each year. We have had several organisational changes and the supply chain has become integrated into a one-stop shopping place, which has given us the ability to automate and standardise processes.

Also we have elevated the supply chain from a service function to a business function. This gives us an end-to-end approach to costs and we are now involved from the very early stages of R&D; the earlier we can get involved, the more money we can save by the way we design manufacturing and logistics, delivery models, risk assessment, and gain commitment from suppliers. In addition, through our close work with our customers we have a much better understanding of what they really need. This demand planning is one of the most important areas where we can take money out of supply chain. The closer you are to the customer the better you understand the demand; this means you can use your inventory more wisely, reduce logistics costs and optimise distribution systems and manufacturing.

We completely changed our demand planning processes. We now have people in our customer teams who take care of this as well as the last-mile execution. Each customer team knows exactly what is needed. We have introduced new software that allows us to collect feedback very effectively and we have installed a supplier collaborative planning tool for demand balancing. More importantly, we have brought the topic of demand planning to board level. Some decisions can only be made when R&D, sales and the supply chain colleagues sit together which we do on a regular basis for executive (e) S&OP planning.”

Which of these challenges keep you awake at night?

“We have successfully managed to transform the global operations over the last few years and we are now trying to bring this to the next level. As well as the challenges already mentioned we face volatility in the market. The faster innovation cycle requires us to be even more agile and flexible. What keeps me awake is how to better anticipate the future and embed our supply chain into the next wave of development as we push to the next level. Part of this involves shaping the supply chain not only for ourselves but also for our suppliers and for our suppliers’ suppliers. The aim is to create an equal system to the third and fourth tiers so that we all work together on a value chain, or what we like to call an ecosystem. The feedback from suppliers has been very positive because they are eager to work closer with us, even from the R&D stage; in this way we are taking risks together. When you analyse successful companies you realise they are successful because they have developed such an ecosystem.”

Who do you like to meet for exchange of knowledge?

“In the past I had peer-to-peer connections so I was connecting with CEOs. I believe you should broaden this to all levels of the community, not just in your own industry but also from completely different industries to understand their challenges and translate their solutions into your business. For example, Amazon is a role model for order management and distribution. In the past we looked at the automotive industry but now we are looking at less central organisations and collaboration within an ecosystem. Apple is a good example of this.”

Which book has inspired you the most and why?

“I recently picked up a re-edited version of the old book, Gemba Kaizen, by Masaaki Imai. It goes back to basics but I believe operations still needs to be built on basics. Although traditional, the book is still very inspiring and very true.”

Where do you see yourself professionally in five years time?

“Head of operations at Nokia is already a dream job but at some point I could see myself moving towards a bit broader role such as Chief Operating Officer (COO) that looks at the entire engine of a company. Given one of my other passions, I might also be growing grapes and making wine!”